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Wednesday, January 28, 2009

With declining property values and a slumping economy, many Californians are looking for ways to cut back. For California homeowners who have purchased in the last 5-10 years, one of the easiest ways many people can reduce their spending is to pay less in property taxes. This can be accomplished by ensuring that your property tax assessment is accurate and as low as possible.

If you are not sure of the accuracy of your tax base, consult your local Realtor or real estate appraiser to find out if your assessed value is close to accurate given the current value of your home. Many Californians are finding their current assessments to be completely inaccurate, especially if they bought 2-10 years ago, and will save hundreds, if not thousands, by filing some simple paperwork.

For homeowners with over-assessed property, there are two different ways for you to get it reduced. The first is the Informal Assessment Review, which we could call the easy way because you simply ask the county assessor to review their assessment of valuation for your property by filing a simple form. When this doesn’t work, The Formal Request for Changed Assessment, which is a little more intensive but can still pay dividends, involves filing an appeal with the Assessment Appeals Board where you can choose to have an independently reviewed Hearing regarding your case. In many districts, including Orange County, the Assessor wants property owners to file the informal review before requesting a formal review so owners really need to check with their local Assessor.

Informal Property Tax Appeal or Review - Each county has deadline dates that may vary, but the informal appeal process is desirable because with little effort you may get the assessor’s office to lower your property assessment just by filing a review request. On the other hand, they are the ones who set the value in the first place and it may not be realistic for them to readily admit that they made a mistake especially considering there is no independent overview party reviewing the process and decision. If the assessed value is determined to be in error (lower), then you will be granted a reduced assessment and they will reduce the taxes required. This will result in a tax refund (with interest) that will automatically be sent to you. If you are denied and still feel that the assessed value is overstated then you may need to file the Formal Appeal.

Formal Property Tax Appeal or Review - Formal Requests for Changed Assessment and Appeals are usually due either on September 15th or November 30th. The advantage of the formal review is that you will get an independent review of your assessed value by a Hearing officer. The disadvantage is that it will take more time and involve more effort. It is not necessary to provide comparable values and information at the time of the application, but you might as well get them prepared since you will need them at the Hearing later. Finding the data is more difficult as time proceeds, so it is smart to get the homework done early. Comparable sales (dated no later than March 31st for 2008) are a basic minimum of evidence that is needed at the Hearing. After filing your Formal Request for Changed Assessment it may take 6-9 months before you hear from them regarding an appointment to schedule a Hearing. Once you do hear from them then it may be prudent for you to call the Assessor’s office to see if you might be able to reach an agreement on a lower Assessed value without going to a Hearing. If an agreement can be reached on a lower value, you can enter a Stipulation Agreement which reflects the revised Assessed value for your property for the appeal year.

Appeals Board Hearing - If an agreement is not reached, you either present your case to a Hearing officer (the default method) or you present your case to the Assessment Appeals Board. After a decision is reached you will be notified if a reduction is granted. If so, you will receive a refund usually within 6-8 weeks

Addition information and forms can be found at the California State Board of Equalization Website http://www.boe.ca.gov/proptaxes/pdf/pub30.pdf and forms for informal reviews requests can be found at your county tax assessors website. Residents of Orange and Los Angeles Counties can feel free to contact us to aid in finding comparable properties for their assessment appeal. Filing these simple forms has helped many people save quite a bit of money so if you have reason to believe your assessed value is too high, we’d encourage you to at least check it out.

Wednesday, January 14, 2009

The recent statistics are in and home sales in the local areas have some definitive trends. Entry-level homes, currently defined by those at $350,000 and less have been the best selling housing demographic. How much better? Try 70% of the current home sales for last month!

We attribute this statistic to a few things:

Most of the distress sales fit this price point

FHA loans have increased in popularity helping buyers with smaller down payments

Investors looking for best cash-on-cash opportunites are finding this market attractive

Rents are still very strong for modest single family homes

With interest rates recent decline and many home shoppers finding rates around 4.5-4.7% for convential fixed 30 year financing we expect this to remain the strongest market segment in 2009.

The other hot selling segment has been the luxury property market. Less influenced by stringent financing and a sluggish economy, the ultra affluent are still buying expensive real estate. While market prices have had to become more competitive, luxury home owners are still finding sales chugging along.

The slowest market segments are the mid-range and upper mid-range homes which we are attributing to owners in the lower segment lacking home equity making "move up" sales tough. While sales are tough, they are not impossible, but home owners need to expect to be very aggressive with their pricing.

What to expect next?

Prices to continue a slow creep downward

Interest rates to slowly creep upward with inflationary pressures

Sales to continue to increase in the lowest and highest segments

More bidding wars for rock bottom priced bank owned property

More lenders willing to workout short sales

Well, that's our crystal ball, well worth the price of admission!

Have a great month and as always, we're always here to discuss any of your real estate needs regardless of the challenging market.

Tuesday, January 6, 2009

A new revision to the FICO scoring formula will soon be rolled out. In fact, two of the three credit bureaus have already admitted to the new rules. In effect the credit balances that you carry will matter more than ever to the scoring, but luckily your little missteps will count less.This update to the credit scoring system (called FICO 08) has been delayed for several months, but it finally will be rolling out early in 2009. It offers a few advantages to the consumers but also includes some serious new risks. The new scoring system is supposed to do a better job of predicting defaults than the classic FICO that we are used to.

Somewhere between 75% and 90% of national lenders use the FICO system to evaluate the credit worthiness of applicants. It is reported that FICO 08 is even more sensitive than the classic FICO to how much of your available credit that you are actually using. If a credit card issuer reduces your credit limit then you could see your credit scores plunge, even if you are not carrying a balance over from month to month.

Also the new formula responds more negatively if your number of open accounts falls, as is the case currently when the card issuers are closing or deactivating accounts that are not used much (those accounts are not very profitable, but still offering risks to the card companies). Your FICO 08 scores can go down with just this reduction of open/available credit.

On the other hand, many changes to the new system are not bad . FICO 08 does provide some improvements, including:

Collections – The new formula does ignore some of the small collections (garbage) that can occur if the original debt is less than $100.00. This is a way overdue improvement.

Credit missteps– The new formula is less punishing to people who have had a repossession or account charge-off as long as the more recent activity is problem free.

Authorized users – The new formula will be factoring in some limited number of authorized user accounts (used by some to improve their own account scores), but supposedly ignore additional ones if they materially affect the score.

Installment loans – The new formula is even more sensitive to the mix of revolving credit (cards, etc) and installment loans (homes, cars). Preference is given to the installment type loans over the revolving type loans and the scores will reflect this preference.

Credit inquiries – This is still a confusing issue, with many experts on both sides. Some believe the new formula will allow more inquiries without punishing the score, while others say this is not true. The best path is still to be very conservative on who and how often your credit is searched